Three IRA Mishaps That Can Cost a Bundle

Your IRA assets -- and your parents' -- may be at risk, and not due to big dips in the stock market or lousy investment choices. There's something else to worry about: bad advice and mistakes by bankers, brokers or financial advisers who handle or advise on transactions in individual retirement accounts.

"There is a big gap in knowledge about IRA rules, and it is the individual investor who suffers because of it," says Michael Nelson, an IRA adviser based in Baxter, Minn.

IRA mishaps can cost investors a bundle, both in terms of taxes and the loss of years of tax-deferred growth.

Here are some of the most common mistakes investors suffer at the hands of professionals who should know better:

Undoing Your IRA

If you have more than one IRA, nothing should be more run-of-the-mill than moving assets from one to another to consolidate accounts. But some banks or brokerages inadvertently cash out investors' accounts in the process, Nelson says.

"Investors end up with a tax bill for their entire account, and the IRA they thought they had is now just a regular bank account," he says.

The problem occurs when one institution -- either the custodian that is trying to move assets out or the institution receiving the assets -- calls the transaction a "rollover" instead of a "transfer," Nelson says. "They simply check the wrong box on the form because they don't know the difference."